A survey was conducted of the 15 largest
beef processors to identify the mix of procurement
practices being used and to understand
reasons motivating recent processorproducer
linkages. Processors are shifting
away from cash-market live, fed-cattle trade,
which represents only 36% of cattle procured
by survey respondents in 1999. Processorowned
cattle feeding represents only approximately
5%, where it has been for more than
a decade. Various other forms of pricing
such as carcass weight, grid, and formula
represented the largest portion of purchases
at 49%. Processors indicated the two most
important reasons they get involved in contracts
and marketing agreements with producers
is to secure higher and more consistent
quality cattle. Assuring food safety was
also a motivation for linking more closely
with cattle producers. In the future, processors
felt these motivational factors would
increase in importance. As cattle feeders
explore grid pricing and alliance opportunities,
it is important they understand why
processors desire to enter into contracts and
marketing agreements.
